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Morningstar: Investors need full fund disclosure

A related issue is where the revenue from securities lending actually goes. In most cases, asset managers take a portion of the securities lending revenue to pay themselves for acting as a lending agent. Once again, investors have no way to know if they’re being treated fairly or not.

To be clear, I am not advocating against the use of derivatives or securities lending. Both can be of great benefit to investors if well managed and accompanied by sufficient transparency. However, there needs to be much more openness in order to ensure investors are operating with sufficient knowledge to gauge their risks.

Christopher Traulsen is director of fund research for Europe and Asia at Morningstar